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Archive for April 18th, 2010

 Some of my posts spark debate between Bush supporters and Clinton fans, particularly on my Facebook page. I hate to burst anyone’s bubble, but Clinton wins that contest hands down. I’m only talking about economic issues, to be sure, so I’m not looking to trigger any discussions about foreign policy or abortion.

Regarding economic issues, perhaps the key thing to understand is that there are many factors which determine economic freedom (which, of course, is related to growth and prosperity). Some people look at a high-profile issue such as taxes, and are tempted to rank Bush higher because he cut taxes in 2001 and 2003, whereas Clinton increased taxes in 1993 (he also cut taxes in 1997, but not as much as he raised them four years earlier).

But while Bush had a better record on taxes, he had a much worse record on spending. And as I wrote in the Washington Examiner a couple of years ago, Bush’s record in other areas was more statist than Clinton’s (and I was writing before the bailouts).

Perhaps the best way of showing the difference between Bush and Clinton is to examine the Economic Freedom of the World annual rankings. Not all the years are available, but the image below clearly shows that economic freedom rose during the Clinton years and fell during the Bush years.

I’m no great fan of Bill Clinton, and I’ll be the first to admit that many of the good things that happened under Clinton were the result of a GOP Congress (in the good old days before they were corrupted by compassionate conservatism). But also keep in mind that Clinton signed into law almost all of the good policies that were enacted during his reign. Likewise, Bush signed into law almost all of the bad policies that were enacted during his reign. If I’m choosing between the economic policies that were implemented by the previous two Presidents, the answer is obvious.

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Tyler Cowen’s recent New York Times column explains how nations as diverse as Ireland, Sweden, and Canada have successfully solved fiscal problems by limiting the growth of government spending:

America’s long-run fiscal outlook is bleak, mostly because of an aging population and rising health care costs. To close the gap between expenditures and revenue, …we’ll need to focus especially on reducing spending, largely because that taxes on the wealthy can be raised only so high. …Higher income tax rates would discourage hard work and encourage tax avoidance, thereby defeating the purpose of the tax increases. …Higher levels of government spending and taxation would also soak up resources that might otherwise foster innovation and new businesses. And sentiment would most likely turn ever stronger against those immigrants who consume public services and make the deficit higher in the short run. …The macroeconomic evidence also suggests the wisdom of emphasizing spending cuts. In a recent paper, Alberto Alesina and Silvia Ardagna, economics professors at Harvard, found that in developed countries, spending cuts were the key to successful fiscal adjustments — and were generally better for the economy than tax increases. …The received wisdom in the United States is that deep spending cuts are politically impossible. But a number of economically advanced countries, including Sweden, Finland, Canada and, most recently, Ireland, have cut their government budgets when needed. Most relevant, perhaps, is Canada, which cut federal government spending by about 20 percent from 1992 to 1997.

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I’ve read several places that Ronald Reagan instinctively understood supply-side economics because Hollywood stars sooner or later learned that making more than a couple of movies per year was pointless when marginal tax rates were 90 percent. The same thing happens in sports. I’ve already posted about soccer stars turning down contracts in places where tax rates are high. Now we have a fascinating little story about taxes and the boxing profession:

For a very long time, boxing was the only really big-money sport for athletes. …At a time when Babe Ruth was being razzed for his $80,000 salary (more than the President of the United States, it was pointed out, to which Babe supposedly replied in 1930, “Well, I had a better year than he [President Hoover] did”), heavyweight champion Jack Dempsey made about nine times as much—over $700,000, for his unsuccessful title defense against Gene Tunney in 1926. …The 1950s was the era of the 90 percent top marginal tax rate, and by the end of that decade live gate receipts for top championship fights were supplemented by the proceeds from closed circuit telecasts to movie theaters. A second fight in one tax year would yield very little additional income, hardly worth the risk of losing the title. And so, the three fights between Floyd Patterson and Ingemar Johansson stretched over three years (1959-1961); the two between Patterson and Sonny Liston over two years (1962-1963), as was also true for the two bouts between Liston and Cassius Clay (Muhammad Ali) (1964-1965). Then, the Tax Reform Act of 1964 cut the top marginal tax rate to 70 percent effective in 1965. The result: two heavyweight title fights in 1965, and five in 1966.

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